By Favour Nnabugwu

Insurance regulatory bodies in Africa dread the role of being undertakers and being forced to intervene in the companies they supervise when companies under their control suffer liquidation.

Mr. Fola Daniel, Commissioner for Insurance who made this assertion while addressing over 700 delegates at the 38th General Assembly/Conference of African Insurance Organisation (AIO) in Zimbabwe, stated: “Regulators don’t want to do the task of an undertaker. When an insurance company dies suddenly, it got to be buried. That is a task that a regulator does not want to perform at all.”

In a paper titled: Unlocking Growth through Strengthening the Insurance Regulatory Framework, Daniel while explaining the basic roles of insurance regulators in the continent elucidated that insurance regulators are community police that ensure that the sector they supervise is safe and sound.

When a company is recognised to be insolvent under statutory accounting, the state insurance department has at least two options. Those options may follow a preliminary stage called “supervision”, which is intensive oversight of a troubled company without formally taking possession.

The first option after recognition of insolvency is rehabilitation which is to intervene in the control and operation of such a company. That is appropriate where the department believes the company can come back, else the other option is liquidation, which calls for stopping business and winding up the company. Either step requires an order of a state court.

He also said that insurance regulators help to sustain insuring public confidence and trust in the sector and the third of which he said regulators avoid carrying include the job of an undertaker and intervening in troubled companies.

According to him, “The third one which no regulators want to go into is the task of an undertaker. When an insurance company dies suddenly, it got to be buried. That is a task that a regulator does not want to perform at all”

For that reason, he said insurance regulators especially NAICOM is more rigorous in its supervision and regulation to make sure that there is no sudden death.

Regulators, he pointed out could have incidence of intervening in a company before its dies which, he added, is another area that regulators do not like to delve into.

Among its many activities, insurance regulation has traditionally concentrated on solvency. Its first involvement with pricing and underwriting was to reinforce the industry’s efforts to maintain standard rates and classification of risks, all to protect the financial condition of insurers.

He said, “Regulators also do not want to intervene in companies because of lack of sufficient capacity. When a regulator intervenes in a company, it removes the management of the company and installs its own management. That implies that the regulator is taking a risk that may go on to haunt it in the future.

“An insurance regulator anywhere in the world,” the Insurance commissioner stated, “is an enabler of productivity because when the insurance industry is productive, the regulator is going to be idle.”

Within two months of his appointment as Commissioner for Insurance, the stalemated recapitalisation and consolidation exercise in the Insurance sector was brought to a successful conclusion in September 2007 by the National Insurance Commission under Mr. Fola Daniel. This resulted in the consolidation of the then 107 insurance firms to 49 insurance companies and two reinsurance companies, totaling 52 companies in the sector at present.